Global Arab Network | Raising the stakes – Banking sector posts healthy growth in Morocco

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Raising the stakes – Banking sector posts healthy growth in Morocco

Global Arab Network - - Sarah Khan

Wednesday, 26 October 2011 14:13

http://www.english.globalarabnetwork.com/images/stories/2010/july/Morocco_Central_Bank.jpeg

Global Arab Network - Having recorded significant increases in profit in 2010 and the first half of 2011, and with the IMF recently noting improvements in core capital and the non-performing loan rate, the Moroccan banking sector continues to post healthy growth in a stark contrast to the struggles of its northern neighbours. This is due not only to organic growth, particularly in the remittances segment, but also a result of capital increases, and mergers and acquisition activity, Global Arab Network reports according to OBG.

In July the IMF, in the concluding statement of its 2011 Article IV consultation for Morocco, noted that assets in the banking sector now exceed 120% of GDP. The report also noted that “authorities have taken steps to promote access to banking and savings services to support banks’ deposit mobilisation,” and described efforts to strengthen core capital as a success, citing a decline in the non-performing loan rate from 6.1% in 2008 to 4.8% in 2010, and an increase in the banking system’s solvency ratio from 11.8% in 2009 to 12.3% at the end of last year.

Total customer deposits stood at MD628bn (€54.2bn) on 30 June, up 4% from MD604bn (€52.1bn) a year earlier, while total loans to customers were worth MD587bn (€50.6bn), an increase of 9.5% on the MD536bn (€46.2bn) at the same time in 2010. The IMF forecast that credit to the economy will grow by 6.2% in 2011, at the conservative end of the Moroccan authorities’ predicted range of 6-8%.

Profits are increasing hand-in-hand with turnover. In 2010 aggregate net profits in the banking sector grew by 5.5% to MD9.7bn (€837m), according to Bank Al Maghrib, the country’s central bank, and 2011 is also shaping up as a profitable year. Net profits at Attijariwafa Bank, the country’s largest financial institution by market value, assets and outlets, rose 15.2% for the first six months of 2011 on the same period last year to MD2.24bn (€193m), with turnover up 14.8% to MD7.94bn (€685m) and net lending having grown to MD4.85bn (€418m), a rise of 14%.

To further boost turnover and profits, banks are increasingly competing for the lucrative business of Moroccans living in Western Europe. In July, Chaabi Bank, the European subsidiary of Morocco’s Banque Populaire Group, opened a fourth Spanish branch in the southern city of Almeria aimed at the town’s 75,000-strong Moroccan immigrant community, and in particular at helping them transfer money to Morocco and invest in the country. Spain accounts for around 10% of remittances from Moroccans living in Europe to their families back home, behind France’s 41%.

Remittances, which are the country’ s second-most important source of foreign exchange after tourism, have been increasing at an average rate of around 8% a year since 2003 and grew to MD26.7bn (€2.3bn) in the first six months of 2011, up 7.1% on the same period the previous year. Deposits held in Morocco by Europe-based immigrants stood at MD127bn (€10.96bn) in 2010, or just under 20% of total national banking deposits.

While expanding its presence abroad, the Banque Populaire Group is also undergoing a restructuring process and moving to increase its capital. In June it was reported that the Ministry of Finance intended to sell a stake of 20% in group member Banque Centrale Populaire (BCP) to the Banques Populaires Regionales, the 10 regional banks that make up part of the group and already hold a combined 20% stake (consisting of stakes of 2% each) in BCP. The government, which owns a 40% stake in BCP, reportedly hopes to raise MD5.3bn (€457m) through the sale.

The group intends to increase its capital by 10% through a public share offering and by another 5% through selling shares to its employees before the end of the year. It is also reportedly planning to increase its capital by a further 5-15% by selling a stake to a major local or foreign financial institution.

The Banque Populaire deal is not the only one on the table. In late August it was reported that local financial conglomerate FinanceCom would acquire Spanish bank Caja de Ahorros del Mediterraneo’s 4.65% stake in Morocco’s BMCE Bank. The purchase followed the Spanish institution’s failure to pass an EU stress test in July, and brings FinanceCom’s stake in the group to 9.23%. The company also has a 16.08% stake in BMCE through its subsidiaries RMA Watanya and SFCM.

The mergers and acquisitions look set to help further underwrite the growth of Morocco’s banking sector. While the eurozone struggles with the debt crisis, the kingdom’s largest banks – many of who have established a sizeable international presence in recent years – look set to continue their encouraging trajectory over the remainder of the year thanks in large part to increased capitalisation and intensifying remittance activity. (OBG)

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